Merkel Says Ukraine May Lose EU Gas Without Russia Deal

Updated on
German Chancellor Angela Merkel
German Chancellor Angela Merkel told reporters today, “If Europe should itself suffer because there is no contract between Russia and Ukraine, then Ukraine would also not receive this reverse flow -- because then Europe would naturally need all the gas itself.” Photographer: Thierry Charlier/AFP via Getty Images

German Chancellor Angela Merkel said Ukraine risks losing gas supplied by its European supporters if it doesn’t reach an agreement on payments to Russia.

The European Union is showing solidarity with Ukraine through reverse flow gas deliveries in its conflict with Russia, Merkel said at an EU summit in Brussels. She urged negotiators to come up with a financing agreement before the turmoil disrupts gas supplies to Europe in the winter.

“If Europe should itself suffer because there is no contract between Russia and Ukraine, then Ukraine would also not receive this reverse flow -- because then Europe would naturally need all the gas itself,” Merkel told reporters today.

As winter approaches in Europe, Russia and Ukraine have failed to negotiate an agreement on natural gas prices amid their broader conflict over ties to Europe, separatist fighting with government forces in the east and Russia’s annexation of Crimea. The two former Soviet states said last week they’ll seek a temporary deal after EU-brokered talks stumbled.

Merkel said negotiators next week will talk about options for bridge financing that would cover payments until an International Monetary Fund package for Ukraine is ready by February at the latest. This will also unlock EU money.

Temporary Solution

With Russia demanding payments by November and the IMF program, as well as the forming of a Ukrainian government, taking longer, Merkel said a temporary solution must be found.

“We have to find a way to bridge the gap in the meantime, from about November to February,” she said.

Merkel said she sees a possibility for an agreement ahead of the next round of talks on Oct. 29, even as she said there’s no scope for lifting EU sanctions against Russia over the conflict. The 28-member bloc depends on Russian gas piped across Ukraine for about 15 percent of its demand.

“There could be a good chance to find a way forward if there’s good will,” Merkel said. “But the problem isn’t solved.”

State-run OAO Gazprom halted deliveries to Ukraine in June as a separatist conflict raged in the east of the country. While shipments to Europe haven’t been disrupted, the EU is seeking to avoid a repeat of supply cuts experienced during 2006 and 2009 disagreements.

The Ukrainian government, the U.S. and the EU blame Russia for fueling the conflict in Ukraine’s easternmost region. The Kremlin denies any involvement.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE